Buying your first home is one of life’s major events. No one will say it’s an easy thing to do. It’s hard to save money for the right down payment. It’s helpful though to take advantage of government programs designed for first time home buyers. The First Time Home Buyers Tax Credit is a program you will want to review.
In 2009, the federal government of Canada instituted the First Time Home Buyers Tax Credit (HBTC) as part of Canada’s Economic Action Plan. The HBTC is an income tax credit to encourage first time home buyers to enter the housing market and purchase a home. It is a non-refundable tax credit that reduces the amount of federal income tax you have to pay.
The amount of the tax credit is based on the lowest federal income tax rate for the year. For the past few years the lowest rate has been 15 percent. The lowest rate is multiplied by $5,000 to make the HBTC a value of $750.
There are a few qualifications that need to be met to be eligible for the program:
- You, your spouse or common-law partner purchased a qualifying home during the tax year.
- You, your spouse or common-law partner didn’t own a home during the tax year.
- You didn’t own a home any of the four preceding years.
- You occupy the home and make it your principal residence no later than one year after you purchased it.
A qualifying home is housing located in Canada. It includes existing or newly built homes, single-family homes, semi-detached homes, townhouses, mobile homes, condominium units and apartments.
For a person with disabilities, the applicant doesn’t need to be a first-time home buyer. To qualify as a person with disabilities, the same definition that is used when claiming disabilities for income tax purposes applies.
To claim the HBTC, use line 369 in the Schedule 1, Federal Tax of your personal income tax return. You claim the HBTC in the taxation year in which the qualifying home is acquired. If you purchased the house with your spouse or partner either one of you can claim the credit or you can share it as long as the credit doesn’t exceed $750. If you purchase a home jointly with an individual, you can both claim the credit but again, the credit doesn’t exceed $750. You don’t need to provide any documentation with your tax return although the documentation should be readily available.
Purchasing your first home can be a challenge. Taking advantage of programs like the Home Buyers Tax Credit can make the challenge a little more manageable.